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Consumer confidence swings strongly into optimistic territory

| Economic factors

SA cheered up by a record 34 points thanks to the "Ramaphosa rally", causing consumer confidence to swing from a pessimistic minus eight points to an optimistic 26 points.

The quarterly poll of South African consumers sponsored by First National Bank (FNB) and collated by Stellenbosch University’s Bureau for Economic Research (BER) found the change from the fourth quarter of 2017 to the first quarter of 2018 was the largest in the index’s history.

Before the first quarter of 2018’s uptick, the consumer confidence index had suffered three consecutive years of pessimism, its longest losing streak since it was launched in 1982.

"Most consumers are optimistic about the outlook for the South African economy and household finances," said FNB chief economist Mamello Matikinca at the release of the index.

Higher confidence results in more spending power which stimulates the economy.

The improvement in consumer sentiment has been ascribed to the change in the country’s leadership, which has also helped the rand strengthen.

"President [Cyril] Ramaphosa’s new dawn has created positive sentiment with consumers and businesses," said Matikinca.

The economic outlook index also improved vastly from minus two to positive 34, while household financial outlook rose from two to 31.

Consumer confidence surged across all income and population groups. White consumers recorded the largest increase in confidence, with a leap of 45 index points to 18, while black consumer confidence rose by 34 index points to 33.

Investec Bank economist Lara Hodes expected consumer confidence to have improved, but not by the amount it did. She expected an improvement of about seven points to negative one, from the negative eight points recorded in the fourth quarter of 2017.

BNP Paribas senior economist Jeff Schultz expected the consumer confidence index to have improved to a level of negative in the first quarter but added that there remained scope for it to turn "modestly positive" towards the middle of the year.

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